Financial reform plan ‘poses risk’

The proposed timetable for the reform of financial regulation is too ambitious and poses risks both to firms and the authorities, the Association of British Insurers (ABI) has warned.

It has also urged the government to avoid over-regulating, claiming “excessive intervention” would limit consumer choice and access to financial services.

The trade body was responding to a Treasury white paper published in July setting out its proposals on reforms including the establishment of the Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority. The latter two will replace the Financial Services Authority in a twin peaks model of regulation slated to come into force in earlier 2013.

But the timetable is “very ambitious”, according to the ABI, which claimed that both firms and regulatory authorities would be stretched as a result. It also warned of potential confusion to the detriment of consumers if the two new regulators fail to co-ordinate successfully. The ABI also wants UK authorities to do more to influence EU rules, which it said were becoming the main source of regulatory requirements for its members.

Otto Thoresen, director general of the ABI, said: “We support the government’s efforts to reform the regulatory system, but would urge that they keep a focus on fixing the causes of the financial crisis and do not get distracted by the symptoms. Over-regulation or excessive intervention will not help customers and could make it difficult for them to access the products they want and need.”